SHANGHAI, Feb. 1 (SMM) – According to the NBS, China's crude steel output was 57.66 million mt in December 2012, and daily output was 1.86 million mt, down 2.9% MoM. China's crude steel output totaled 717 million mt for the whole year of 2012, up 3.1% YoY.

Data released by the China Iron & Steel Association showed that the daily crude steel output at major producers was 1.6749 million mt in the first half of January, up 3.8% MoM. Based on this, China's total daily crude steel output should be around 1.9442 million mt in the first half of January, up 2.3% MoM. Operating rates at steel plants have experienced increases again following continuous drops due to comparatively sufficient raw material stocks and increased orders. However, in the face of slack steel demand, gradually rising daily crude steel output put some pressures to steel prices in the second half of January.

Daily crude steel output increased during January, and most steel producers appropriately raised raw material stocks ahead of the Chinese New Year holiday just like what they did in past years. This led to the fact that silicomanganese alloy demand was relatively robust in January. Nevertheless, as steel producers' profits failed to increase noticeably, and since spot silicomanganese alloy supply was comparatively plentiful, traded prices for SiMn 65/17 were lifted higher by merely RMB 50/mt during January from the previous month. Silicomanganese alloy market transactions decreased gradually in the second half of January with the Chinese New Year holiday drawing near.

Steel markets are likely to continue improving in February, which will keep daily crude steel output at high levels. But silicomanganese alloy demand will become quiet since most steel plants already replenished raw material stocks during January. Steel producers still report meager profits on significantly rising iron ore prices, so procurement prices for silicomanganese alloy will probably remain stable during February.

The NBS reported that China's silicomanganese alloy output was 958,500 mt in December 2012, up 2% MoM. Operating rates at silicomanganese alloy producers in Hunan marched slightly higher but underwent no major changes in other regions. SMM holds the view that operating rates at producers in south China should continue to fall marginally in January owing to high electricity prices, but experience little change in north China. This indicated that the average operating rate during January at Chinese silicomanganese alloy producers may have slipped slightly in January. The operating rate is likely to drop further in February on account of the holiday factor, but any downside room is expected to be limited.
 
Collectively, steel markets remain stable, and steel producers have not seen considerable rising space in their profits. With raw material stocks remaining relatively ample at steel plants, operating rate at silicomanganese alloy producers has edged down. As such, SMM anticipates that silicomanganese alloy prices will remain stable during February.